Tricom Equities Ltd v Labaj
[2005] FMCA 757
•3 June, 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TRICOM EQUITIES LTD v LABAJ | [2005] FMCA 757 |
| BANKRUPTCY – Creditor’s petition – counter-claim, set-off or cross-demand. |
Re Low, Ex parte Argentine Gold Fields Ltd [1891] 1 QB 147
Bradbrook v Farrow Mortgage Services Pty Ltd (unrep. Fed Ct of Aust., No.SN420 of 1993, von Doussa J, 9 February, 1994)
Re Gibbs; Ex parte Triscott (1995) 65 FCR 80
Re Gibbs; Ex parte Triscott [1996] 895 FCA 1
GPW Aussie Exports v Latin (1998) 85 FCR 324
| Applicant: | TRICOM EQUITIES LTD |
| Respondent: | JOHN LABAJ |
| File No: | BRG 152 of 2005 |
| Delivered on: | 3 June, 2005 |
| Delivered at: | Brisbane |
| Hearing Date: | 30 May, 2005 |
| Judgment of: | Jarrett FM |
REPRESENTATION
| Counsel for the Applicant: | Ms Hindman |
| Solicitors for the Applicant: | McCullough Robertson |
| The Respondent appeared in person. |
ORDERS
The date of the act of bankruptcy referred to in paragraph 4 of the creditor’s petition presented on 30 March, 2005 be amended to 15 March, 2005 and service and re-verification of the amended creditor's petition be dispensed with;
A sequestration order be made against the estate of the John Labaj;
The applicant's costs of and incidental to the petition, including reserved costs if any, be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 152 of 2005
| TRICOM EQUIRIES LTD |
Applicant
And
| JOHN LABAJ |
Respondent
REASONS FOR JUDGMENT
This is the hearing of a creditor's petition presented on 30 March, 2005. The debtor opposes the making of a sequestration order.
At the commencement of the hearing I gave leave to the petitioning creditor to amend the date of bankruptcy from 16 March, 2005 to 15 March, 2005. I dispense with service and verification of the amended creditor's petition.
Background
On 18 September, 2000, a sequestration order was made against the debtor's estate on the petition of a creditor. The results of a search of the publicly accessible records show that the end date of that bankruptcy was 5 October, 2003.
On 20 January, 2004, the debtor commenced proceedings in the District Court of Queensland against the petitioning creditor. In the proceedings he claimed that when the petitioning creditor gave him advice in respect of certain specified share transactions, it was given negligently. The negligence, it is alleged, caused to the debtor a loss in the order of $100,000. The petitioning creditor has defended the proceedings and is prosecuting a counterclaim against the debtor for fees it alleges are due to it for work and services rendered to the debtor.
There have been some interlocutory skirmishes between the petitioning creditor and the debtor in the District Court proceedings. Firstly, there was an application for default judgement by the debtor against the petitioning creditor. The application was made after the petitioning creditor had appeared in the proceedings and so, that application was rejected by the Registrar.
Secondly, there was an application to strike out the petitioning creditor's defence and for summary judgment on the debtor's claim. It was filed on 5 March, 2004. The debtor failed to appear when the application was called on for hearing on 11 March, 2004 and it was dismissed with costs against the debtor.
Soon after, a second application was made by the debtor to strike out the petitioning creditor's defence and for summary judgment. On
6 April, 2000 both parties appeared, the application was heard and it was dismissed with costs against the debtor.
On 22 June, 2004, the debtor filed a second request for default judgment against the petitioning creditor – that application was again rejected by the Registrar.
On 5 July, 2004, the debtor filed a third application for summary judgment. Soon after, the petitioning creditor made application for an order for the delivery of a list of documents by the debtor. Both applications were heard on 28 July, 2004. The debtor's application was dismissed. He was ordered to pay the petitioning creditor's costs of that application on an indemnity basis. The debtor was also ordered to deliver a list of documents and was ordered to pay the petitioning creditor's costs of that application on the standard basis.
The debtor's proceedings were amended on 6 April, 2005. The basis of the debtor's claim against the petitioning creditor appears to have changed. I will expand on the nature of his claim later in these reasons.
The costs payable by the debtor consequent upon the dismissal of the first and second applications for summary judgment have been separately assessed pursuant to the provisions of the Uniform Civil Procedure Rules (Qld). The costs pursuant to the first order have been allowed at $1,000. The costs pursuant to the second order have been allowed at $1,340. The debtor has not sought to challenge the costs orders on appeal, or to have the costs assessments reviewed as he might pursuant to the UCPR.
The petitioning creditor issued a bankruptcy notice addressed to the debtor based upon the costs orders. On 24 November, 2004, a creditor's petition was presented against the debtor alleging that he failed to comply with the bankruptcy notice served on him. The petition came before Baumann FM on 1 February, 2005. By that time, the petitioning creditor's attention had been drawn to his Honour's decision in Toll v Poinciana Cooperative Housing Society Ltd [2004] FMCA 992. That was significant because the bankruptcy notice served upon the debtor had attached to it the costs assessments, but not the orders by which the debtor was ordered to pay those costs. In those circumstances the petitioning creditor asked for the petition to be withdrawn.
Baumann FM ordered that the petition be dismissed. The order as entered does not record that the dismissal was by consent. The petitioning creditor alleges that it was by consent and that there was no hearing on the merits. The debtor alleges that the petition was dismissed on its merits. No transcript of the hearing before Baumann FM was placed before me by either party. Because of the view that I take of the matter before me, it is unnecessary to determine this issue.
On 18 February, 2005, the petitioning creditor issued a further bankruptcy notice that had both the orders for costs and the costs assessments attached to it. That notice was served on 22 February, 2005. On 30 March, 2005 the creditor's petition presently before me was presented. The requisite affidavits verifying paragraphs one, two, three and four of the petition were filed on that day. The petition was served. It came on for hearing on 20 April, 2005. On that day, the petitioning creditor failed to appear and Registrar Baldwin dismissed the petition for that reason.
The matter came before me on 16 May, 2005 on the petitioning creditor's application pursuant to rule 16.05 FMCR to set aside the orders of Registrar Baldwin on the basis that they had been made in the absence of the petitioning creditor and that the petitioning creditor had an explanation for its failure to appear. I determined that application on 16 May, 2005 and granted the petitioning creditor the relief that it sought. I set the petition down for hearing before me on 30 May, 2005.
The issues
The debtor argues that a sequestration order should not be made because the creditors petition that was before Baumann FM was dismissed and therefore, the issue of whether the debtor's estate should be sequestrated has been determined. The debtor argued his case in terms of "res judicata" and issue estoppel. He argued that once the first creditor's petition was dismissed, the petitioning creditor's right to recover the money due to it under the costs orders was extinguished. His submission is that once the first creditor's petition was dismissed, no further creditor's petition could be presented or prosecuted. I was not directed to any authority for the propositions advanced by the debtor.
The debtor also argues that he has a set-off or cross-claim that he can set up, by reason of which he establishes "other sufficient cause" for a sequestration order not to be made, pursuant to s.52(2)(b) of the Bankruptcy Act1966.
Discussion
No attack is made by the debtor on the bankruptcy notice issued by the petitioning creditor on 18 February, 2005. It is the source of the act of bankruptcy relied upon in the current petition. The act of bankruptcy relied upon in the current petition is a different act of bankruptcy to that relied upon in the petition dismissed by Baumann FM. For that reason, it is difficult to see how any issue estoppel or res judicata could arise. Nor do I accept the debtor's proposition that the dismissal of the first creditor's petition extinguished the petitioning creditor's right to pursue satisfaction of its costs orders.
The bankruptcy notice relies upon two interlocutory costs orders, each assessed separately and in respect of which there has been separate orders of assessment issued. There is no doubt, I think, that a costs order made in interlocutory proceedings can support a bankruptcy notice: Re Gibbs; Ex parte Triscott (1995) 65 FCR 80 and on appeal [1996] 895 FCA 1.
Were it not for the Bankruptcy Legislation Amendment Act 2002, which amended the Act to allow a bankruptcy notice to issue on the basis of more than one judgment or order of a court (with effect from
5 May, 2003), the bankruptcy notice before me would have been liable to be set aside: Re Low, Ex parte Argentine Gold Fields Ltd [1891] 1 QB 147; GPW Aussie Exports v Latin (1998) 85 FCR 324. The present bankruptcy notice, however, is valid in that respect.
The debtor alleges that he has a set-off or cross-claim against the petitioning creditor, namely his claim in the proceedings in which the costs orders were generated (those circumstances are capable of giving rise to a set-off or cross-claim: Bradbrook v Farrow Mortgage Servoces Pty Ltd (unrep. Fed Ct of Aust., No.SN420 of 1993, von Doussa J, 9 February, 1994)). The amendment to the debtor's proceedings in the District Court changed the nature of his claim from one for damages for negligence to a claim for "conversion and interference with the plaintiff's account" which caused him damage in the form of monetary loss. He now claims $180,377.50 against the petitioning creditor.
The petitioning creditor argues that I need not consider the merits of the debtor's claim in the District Court in any great detail because it is bound to fail for a fundamental reason: that the cause of action (whatever it might be) is not the debtor's cause of action. The petitioning creditor argues that the respondent was previously bankrupt between 18 September, 2000 and 5 October, 2003. The transactions which are at the heart of the debtor's action in the District Court took place within the debtor's first period of bankruptcy (13 January, 2003, 16 January, 2003, 17 January, 2003 and 20 January, 2003).
It is apparent that whatever is the cause of action relied upon by the debtor in the District Court, the nature of it is such that it arose during the period of the debtor's previous bankruptcy and is therefore "after-acquired property" for the purposes of s.58(1)(b) of the Act: s.58(6) and s.116 of the Act. It therefore vested in his trustee at that time.
A bankrupt's property vested in his or her trustee by reason of s.58(1) of the Act does not re-vest in the bankrupt upon his or her discharge. So much appears to have been decided in Daemar v Industrial Commission (NSW) (No. 2) (1990) 22 NSWLR 178 (followed in Queensland for example in Cousins v HTW Valuers Cairns Pty Ltd [2002] QSC 413).
I am satisfied that the cause of action sought to be pursued by the debtor in the District Court of Queensland vested in the trustee of his estate in his first bankruptcy, and remains vested in him. It did not re-vest in the debtor upon his discharge from the first bankruptcy.
Thus, the position is that whether or not the proceedings in the District Court raise a meritorious cause of action against the petitioning creditor, that cause of action cannot, at this stage, be pursued by the debtor. There is, therefore, no counter-claim or set-off available to him and therefore no "other sufficient cause" for a sequestration order not to be made.
Before sequestration may be ordered, I am required (pursuant to s.52(1) of the Act) to have proof of:
a)the matters stated in the creditor's petition including the fact that an act of bankruptcy has been committed;
b)service of the petition;
c)the debt remaining outstanding; and
d)the results of a search of the appropriate National Personal Insolvency Index.
The requirements of s.52(1) have been satisfied as a result of the affidavits filed in this matter and the dispensations referred to above.
I therefore make the orders set out at the commencement of these reasons.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate: S. Haysom
Date: 3 June 2005
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